Increasing the Tax on Rentals, Charter and Other Fees Earned By Non-Resident Lessors of Aircraft From 7.5% To 8.5% Pursuant To Subparagraph 4, Section 25 (B) of the National Internal Revenue Code, as Amended

Case Overview and Summary

Summary of Executive Order No. 437

Increasing Tax Rate on Rentals and Fees from Non-Resident Aircraft Lessors
- The tax rate on rentals, charter, and other fees earned by non-resident lessors of aircraft is increased from 7.5% to 8.5%. (Sec. 1)
- The tax rate of 7.5% remains imposed on rentals, charter, and other fees derived by non-resident lessors of machineries and other equipment. (Sec. 2)

Legal Basis and Rationale
- The President is authorized under subparagraph 4, Section 25 (b) of the National Internal Revenue Code, as amended, to prescribe the tax rate on rentals, charter, and other fees earned by non-resident lessors of aircraft, machineries, and other equipment upon recommendation of the Secretary of Finance. (Whereas clause 1)
- The increase in tax rate aims to lessen the regressivity of the income tax system, as the present 7.5% preferential tax rate on rental income of non-resident aircraft lessors is considered low. (Whereas clause 2)
- The common carrier's tax of 2%, which had been one of the bases for the 7.5% preferential tax rate, was increased by one percentage point by virtue of Presidential Decree No. 1959 in 1984. (Whereas clause 3)
- Increasing the tax rate to 8.5% still maintains the preferential tax treatment of said income vis-a-vis the normal tax rate of 35% imposed on other corporate incomes. (Whereas clause 4)

Effectivity
- This Executive Order shall take effect two (2) days following the completion of its publication in a national newspaper of general circulation. (Sec. 3)